The development and preparation method of nano-modified transformer oil are summarized. The influence of nanoparticles on the electrical properties including breakdown strength and dielectric property is summarized. The mechanism of the influence of nanoparticles on dielectric property is discussed. Meanwhile, the effect of nanoparticle on the thermal property is discussed along with the corresponding mechanism. At last, the research of the new environmental-friendly vegetable oil modified by nanoparticles is summeried. It is found by correlative study that the electrical and thermal properties of transformer oil could be improved by proper nanoparticles. The nano-modified transformer oil meets the requirements of miniaturization and higher voltage of electric devices in power system.